About Authorisation

In order to conduct financial services in or from the DIFC, firms need to obtain a licence from the DFSA. To conduct ancillary services in or from the DIFC, firms need to be registered by the DFSA. As a risk-based regulator, the DFSA conducts initial assessments to ensure firms adhere to the DFSA’s standards of conduct and business.

Becoming Authorised

In order to conduct financial services through the Dubai International Financial Centre, individuals or entities need to seek authorisation from the DFSA. Authorisation is given in the form of a licence which is issued by the DFSA, which specifies the type of financial services that can be conducted.

For more information about the authorisation process, refer to the sections under the specific entities:

The DFSA - Innovation and Financial Technology

The DFSA recognises the importance of innovation and technology to support and enable financial services business models, products and services.

Financial Technology, or FinTech, can enhance and improve the efficiency of markets and provide better services and solutions.

The DFSA will allow firms to apply for a restricted class of financial services licence which we refer to as an Innovation Testing Licence (ITL).

The ITL will enable FinTech firms to test new products, services and business models whilst only complying with Rules appropriate for testing.

WHAT IS THE OBJECTIVE OF THE DFSA’S ITL?

The DFSA’s ITL provides a controlled environment for a firm to develop and test innovative FinTech ideas without being subject to all the regulatory requirements that would otherwise apply to it as an Authorised Firm.

WHAT ARE THE ELIGIBILITY CRITERIA?

To be considered for this type of Licence, firms need to meet the following criteria:

a) it must involve innovation and the use of FinTech;

In assessing if a business involves innovation and the use of FinTech, the DFSA will consider, if the business model, product or service uses new, emerging or existing technology in an innovative way, and if it brings a new benefit to consumers or industry

b) it must involve an activity that, if carried on in the DIFC, would amount to a Financial Service (or combination of Financial Services);

In order to obtain a DFSA Licence, the activity proposed must involve a Financial Service within the scope of the DFSA’s regulatory regime, for example, arranging deals in investments or advising on financial products.

c) it must be ready (or soon be ready) to start testing with customers or industry;

In assessing if a business is ready to start testing, the DFSA will want to see a regulatory test plan that, for example, sets out the objectives and parameters for testing, and the timeline and key milestones for that testing.

d) the firm must intend to roll out its business on a broader scale in or from the DIFC after it has successfully completed testing.

The DFSA will want to see evidence of how the operator intends to roll out its business at the end of the test period.

WHAT ARE THE AUTHORISATION REQUIREMENTS?

If the eligibility criteria are met, in order to be licensed, a firm must complete an ITL application form and regulatory test plan that describes the proposed business model, product or service and the details of how that will be tested and ready for regulation. The DFSA will help applicants navigate through this process.

WHAT RULES WILL APPLY?

The DFSA will work with a firm to establish which Rules should apply during the testing period. While the DFSA will give waivers from, and modifications to, some Rules, there are some key requirements that must be met. These include, being located in the DIFC, complying with UAE Federal Laws, and acting with integrity and due skill, care and diligence.

WILL THERE BE ANY RESTRICTIONS?

Some limits will be placed on the testing activities to ensure appropriate controls for the safety of any customers involved. These include, for example, restrictions on the number and type of customers that may take part in testing.

HOW LONG IS THE TESTING PERIOD?

The testing period will be for a finite period of time, normally six to twelve months. In exceptional cases, the DFSA will consider extending that period.

WHAT HAPPENS AT THE END OF THE TEST PERIOD?

If a firm has met the outcomes in the regulatory test plan and has shown it can meet the full DFSA authorisation requirements, it will migrate to a full licence. If it does not, it will have to employ an exit strategy.

Authorised Firms and ITL

If you are an existing Authorised Firm with a valid DFSA Financial Services Licence, and wish to test an innovative FinTech business model, product or service, you do not need to apply for an ITL. Instead, if you already have the authorisation for the activity you wish to carry out, you can apply to the DFSA for relevant waivers or modifications if there are DFSA Rules that are not appropriate for testing.

Alternatively, if you do not have the particular authorisation for the activity you wish to carry out, you would need to seek to amend your licence to obtain that authorisation. You can then apply to the DFSA for waivers or modifications if there are Rules that are not appropriate for testing.

The DFSA will treat this aspect of the Authorised Firm's business as an ITL and work with you to establish the right regulatory test plan.

firms

Individuals

Authorised Individuals are the officers or employees who carry out defined Licensed Functions within an Authorised Firm.

These functions are materially linked to an Authorised Firm’s management, and/or the provision of its financial services. As a result, Authorised Individuals must meet particular standards relating to their experience, knowledge and qualifications.

A firm must make separate applications for each individual it wishes to become authorised.

Applicants will only be authorised if the DFSA is satisfied that they are fit and proper, and that the functions of their role will be conducted and managed in a sound and prudent manner.

market institutions

An Authorised Market Institution (AMI) is an exchange or a clearing house in the DIFC that is licensed and regulated by the DFSA.

There are currently two AMI’s in the DIFC, namely the NASDAQ Dubai (formerly known as DIFX) and the Dubai Mercantile Exchange (DME).

How to prepare to apply

We strongly recommend that firms, in the first instance, engage with the Business Development unit of the DIFCA. They will help you understand the value proposition of the DIFC to assist your evaluation of whether a presence here will make business sense for your firm.

Some firms go straight to attempting to complete the application forms. This often results in a poor application and can lengthen the application process. Here are some recommended preparation steps:

Decide what type of business you want to carry out and check which Financial Services you will need to apply for.

Determine who will be part of the senior management and who will be in the mandatory positions. Prepare to complete the necessary individual application forms.

Develop a comprehensive regulatory business plan that sets out your proposed activities, 3-year financial projections and budget, resources such as human, systems and financial. This can be shared with the DFSA Authorisation Enquiries team who will be happy to comment on your proposal.

Familiarise yourself with the applicable rules from the DFSA Rulebook and be prepared to show how you will comply with those rules. This will include providing a compliance manual, a compliance monitoring programme, and risk management policies.

Determine your minimum regulatory capital requirements, with which you will need to comply at all times. This should be included in your 3-year financial projections.

Completing the Application Forms

It is vital that you supply all relevant information. Openness and honesty are essential. Should we need to examine your application more closely because of any disclosures you make, this will not necessarily count against you. However, deliberately withholding information or providing false or misleading information will adversely impact the success of your application. If in doubt, disclose.

If the information you provide is inaccurate or incomplete, we may deem your application as materially incomplete, in which case it would not be accepted. Thus, missing information will lengthen the application process. Ensure that all relevant documents are also included with your completed application.

You should also start the registration process with the DIFC Registrar of Companies at the same time as you submit your DFSA application. This will help you to avoid delays at the end of the authorisation process.

how we assess applications

Before we can authorise a firm as an Authorised Firm, we need to be satisfied that the firm meets our Fit and Proper test, and is likely to do so on an ongoing basis. Generally, Fit and Proper means the ability to carry out a financial service competently, with honesty and integrity.

The areas we look at include:

Legal status:

A firm must be a body corporate or partnership. It can be formed in the DIFC, or a firm can establish a branch of a legal entity based in another jurisdiction. In the latter instance, the DFSA would expect the outside jurisdiction to have internationally compliant regulatory and legal standards.

Location of offices:

A firm must carry on its activities from a place of business in the DIFC. Please discuss office requirements with the DIFC Authority Business Development Unit.

Ownership and group structure:

The DFSA seeks to establish that it will be able to effectively supervise the firm. Therefore we need to be made aware of any Close Links (eg parent, subsidiary, sister company) which could hinder effective ongoing supervision.

Adequate resources:

A firm must have adequate resources to carry out the proposed financial services including financial resources and adequate systems and controls. A firm must have an internal audit function.

Senior management:

A firm must appoint a Senior Executive Officer, a Compliance Officer, an Anti-Money Laundering Reporting Officer and a Finance Officer. The first three positions require the individuals responsible to be resident in the UAE. As part of our process, we will evaluate the competence and integrity of the proposed senior management team.

authorisation timeline

If the application is complete and the application fee has been paid, we will process your application according to the following timeline:

Within 2 business days of receipt of the application: A letter acknowledging receipt of the application is sent.

Within 10 business days of receipt of the application: An initial review letter is sent. Dialogue between the DFSA and the applicant will start and continue as required to the final review.

Within 4 months of receipt of the application: we aim to complete a final review and recommendation.

The timeline set out above is indicative only. The time taken to process your application will depend on its scale and complexity, as well as the timely submission of information and response to any requests for further clarification. The need to make the correct regulatory decision will always take precedence over meeting target timescales.

A successful application will result in the DFSA issuing you an in-principle letter which will allow you to complete the DIFC Registrar of Companies process. We will then issue you with your DFSA licence once you can demonstrate that you have successfully registered with the Registrar of Companies, have sufficiently capitalised the firm and have met any other outstanding matters.

Carefully identify which of your proposed business activities fall within the definition of Financial Services. Check whether there are any exemptions or prohibitions which may impact your application.

If you are a start-up firm, review our policy statement on start-ups. This can be found in the Regulatory Policy and Process Sourcebook. We do not accept applications for start-up banks.

Check you are submitting the most-up-to date version of our application form(s) and that you have used the right forms for the business activities you are proposing. Ensure your application specifies clearly the Financial Services you intend to carry out.

Be as comprehensive as possible in providing the information required. Make sure your forms are signed and that you have included the required attachments.

Review your application before submission, particularly when using consultants or legal advisers. You are the one who knows your business best and you are responsible for all information contained in the application.

Provide one hard copy and one soft copy of your application. The soft copy should be stored on a CD or memory stick. Please do not send e-mail copies.

Ensure you have paid the correct application fee. Details of the fee schedule are set out in the Fees module of the DFSA Rulebook. We will only commence work on your application when payment and the original application form(s) have been received.

Nominate a contact person within your firm to be responsible for managing the application process and to assist the DFSA with any enquiries.

Initiate the Registrar of Companies process at the same time as lodging your application with the DFSA. This will save you time at the end of the process.

Islamic Finance

The DFSA’s regulatory framework is based on principles of transparency, integrity and efficiency. We have used these to create an enabling regulatory framework for the Islamic financial services industry. With the advantage of being able to design our regime from inception using international standards, we have been able to create a cohesive and balanced regulatory framework, rather than bolting Islamic finance onto an existing conventional regulatory regime.

Central to the DFSA’s approach to Islamic finance is our belief in risk-based regulation. Many of the risks in Islamic finance have their counterparts in conventional finance, and we believe they should be treated similarly. So our regime for Islamic finance is integrated with that for conventional finance, but with explicit recognition of the structures and risks of Islamic finance, where these are different.

We apply internationally accepted standards and principles; in Islamic finance those of the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and the Islamic Financial Services Board (IFSB). A number of DFSA employees are actively involved in the working parties and committees of these bodies. As members of the Asian-Oceanian Standard-Setters Group we contributed to its research paper on financial reporting issues for Islamic finance and can be accessed here.

The DFSA's Islamic Finance Regulatory Regime

The underpinning law is the Law Regulating Islamic Financial Business.Under this law, any firm that holds itself out as conducting Islamic financial business must have a special endorsement on its licence.This may allow the firm to operate as a wholly Islamic firm, or to operate an Islamic window.

Sharia Governance

The DFSA is a Sharia Systems Regulator not a Sharia Regulator.Any firm which conducts Islamic financial business must put systems in place to ensure that the business is conducted in accordance with;Sharia. This includes the appointment of a Sharia Supervisory Board (SSB), of at least three competent scholars.The firm must have systems in place to disseminate the SSBs rulings, conduct regular Sharia reviews and also conduct an internal audit. (See the Islamic Finance Rules Module of the DFSA Rulebook – IFR - click here) These systems requirements provide the DFSA, and firms, with a clear measure against which to assess the firms performance.

Prudential Regulation

Firms who offer Profit Sharing Investment Accounts (PSIAs) are subject to special prudential requirements, which reflect the possibility of Displaced Commercial Risk, ie the fact that the firm may find itself under commercial pressure to pay PSIA holders a rate of return higher than that which would normally be payable under the contract.The relevant rules are contained in the DFSA Rulebook.The rulebook also deals with the capital treatment of various Islamic contracts. (See Chapter 5 of the IFR Module of the DFSA Rulebook - click here).

There are specific provisions relating to Takaful companies in the PIN Module (click here). Islamic firms must in general follow the AAOIFI accounting standards.

Disclosure

There are specific disclosure requirements for Islamic firms.The firm must disclose details of its Sharia Supervisory Board, as well as disclosures about the special characteristics of the products offered.

Islamic Funds

While DFSAs collective investment Funds regime is substantially contained in the Collective Investment Law, the Investment Trust Law and the Collective Investment Rules (CIR) specific provisions relating to Islamic funds are found in the Law Regulating Islamic Financial Business and Islamic Finance Rules (IFR) modile.These are broadly similar to those for firms conducting Islamic financial business, and include the appointment of a Sharia Supervisory Board, and disclosures in the fund prospectus.

Islamic Finance Tailored Handbooks

The DFSA's tailored handbooks for Islamic finance are designed to help firms undertaking particular activities to locate the requirements in the DFSA Rulebook that apply to their activities.

Islamic Securities

Islamic securities may be listed on an exchange in the DIFC, and there are disclosure requirements mainly related to Sharia Board approval.

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